“You buy a home when you can freaking afford it!” So said financial advisor Dave Ramsey to Good Morning
The Ramsey and Hobson Q&A segment followed a story by Bianna Golodryga at the top of the show in which the ABC reporter suggested that many current “victims” of foreclosure actually knew they were getting in over their heads when they bought homes with risky loans.
BIANNA GOLODRYGA: Over the past decades, more Americans than ever became homeowners for the first time. Many of them, we now find out couldn't handle the responsibility of maintaining those homes. And it turns out they may have known that going in, as well. Investment sage, Warren Buffett, offered this theory about how millions of Americans got in over their heads.
WARREN BUFFET: Most people aspire to own their own home. And then when somebody makes it very easy for you to do it, by saying you don't really have to put up any money or we'll give you a 100% mortgage, you're going to do it.
Golodryga's story featured two families in foreclosure. One woman, Mary Jane Byrd from
GOLODRYGA: Did you feel that you were getting in over your head? They can't grab your hand and force you to sign in blood.
MARY JANE BYRD: No. I don't think it's our fault. If they really want to give you a mortgage, they'll find someone to give you a mortgage.
GOLODRYGA: So, who is to blame for this ongoing economic crisis? Wall Street or
BYRD: I don't think it's necessary for us to try, to have to bail them out. They should be taking care of us, the people that they, they wronged.
GOLODRYGA: Not everyone agrees.
LEAH TALLEY: I lost my home to foreclosure. I didn't go to the government and go, hey, listen. I'm losing my home. I think you guys should bail me out.
GOLODRYGA: Leah Talley took out a loan for a home she couldn't afford. And she knew it.
TALLEY: There was this little voice, little Jimmy Cricket [sic] voice going 'don't, don't do this – they valued that loan at too high a value. I went ahead and did it anyway.
What a difference a year – and widespread economic turmoil – make. Such candor is not always easy to find in reporting on debt. Last year, when CMI partnered with our sister division, the Business and Media Institute , and released our study, Debt: Who's Responsible? , one of the key findings was that the networks, with ABC well in the lead, failed to address the issue of personal responsibility when talking about issues regarding debt. That study focused on the coverage evening news programs provided when the first rumblings of mortgage-related problems were beginning to be heard.
The study also noted that morning news shows did a better job of dealing with the personal responsibility angle and that both Hobson and Ramsey did an excellent job of tackling financial personal responsibility directly. Some of Ramsey's advice, given on April 3, 2007, was especially on the mark:
· “You ought to kind of have a clue in your own life. If you're behind in your bills, you have no money, your income is not great, you're probably not getting the best mortgage.”
· “Pay your bills on time or early for a couple of years. You are then ready in your own heart, in your own character, plus your credit, to purchase a home.”
Ramsey, a syndicated radio host who also has a show on Fox Business Channel, is a financial planner whose own recovery from financial destitution  gives him a unique perspective on debt. And his advice is consistent: be responsible for your finances. One year, five months and four days after giving his April 3 advice on CBS's Early Show, he said much the same thing on GMA. A woman who wanted to buy a home but didn't have a good credit score wanted to know what to do to improve her score.
DAVE RAMSEY: If you've got that credit card that you misbehaved with back in college, and you've never gone back and straightened it up, you need to go back and straighten it up. … So go through item by item, on each issue, and begin to clean it up, again, to make sure you've done what you can do. And then it may be okay to wait just a little bit. Make sure you have a good down payment; you've got a good emergency fund. You've got your other debts paid off so when you move into the home it's good and solid. You don't want to be one of these statistics we're talking about.
ROBIN ROBERTS: Exactly. Again, let people realize this is kind of old-school. You save as much money as you can, try to put down as much money as you can. And if you can get away from relying on your credit, which is hard for many folks to do, that's what you suggest, Dave?
RAMSEY: The FICO score is established mathematically by borrowing money. And so it technically is an I Love Debt score. It's the only way you can build your FICO scores, continue to borrow money for the opportunity to get to borrow money. So eventually you do want to move away from that. But when a young couple is doing that and they watch what they're doing with their existing bills, they can be fine and work their way right through this. But you're exactly right, Robin, it is old-school, which is: You buy a home when you can freaking afford it.
“Old school advice.” Would that more people had been heeding the advice of Ramsey and other advocates of personal responsibility rather than being swayed by the instant-gratification mentality that buys without thinking and blames others when it's time to pay the bill.